The 8 Real Causes of Deficits and the Debt

[Cactusboy]

The 8 Real Causes of Deficits and the Debt

 

November 17, 2011 by jackrasmus

 

COMMENTARY: Within a week the Supercommittee will release its recommendations for massive budget cuts targeting predominantly medicare, medicaid, social security, and raising taxes on the middle class in order to fund tax cuts for the rich and their corporations. Even if there is no joint recommendation forthcoming from the Supercommittee, the separate groups will issue their own reports and Congress will then take up the deficit cutting in any event. The attached just published essay, ‘The 8 Real Causes of Deficits and the Debt’, provides documented numbers showing how medicare-medicaid-social security and other social programs are not the cause of deficits or the debt. It is an excerpt from my forthcoming book, OBAMA’s ECONOMY: RECOVERY FOR THE FEW, to be published by Pluto Press and Palgrave-Macmillan this coming February 2012. For a further detailed consideration of alternatives to the Supercommittee’s forthcoming recommendations, see my just published 35pp. pamphlet, AN ALTERNATIVE PROGRAM FOR ECONOMIC RECOVERY, which can be ordered for $5 from my website, www.kyklosproductions.com, that is accessible from this blogsite from the sidebar to the right.

 

‘The 8 Real Causes of Deficits and the Debt’ by Jack Rasmus, copyright 2011

 

In less than two weeks the congressional Supercommittee is scheduled to release its recommendations to cut $3 to $4 trillion or more from the U.S. budget, as the U.S. blindly plunges into a Greek-like austerity program based on the erroneous economic view that budget cutting leads to economic recovery. At the heart of the cuts will be historic gutting of Medicare and Medicaid. Already Democrats have proposed a minimum of $500 billion–just about what Vice-President Biden offered to Republicans last June and President Obama last July. Not to be outdone, the Republicans countered in October with $760 billion. Supercommittee recommendations for cuts in social security retirement programs may increase that amount to more than a $ trillion.

 

One of the main arguments claiming to justify the cuts in Medicare-Medicaid is that their costs are contributing significantly to unsustainable budget deficits and federal debt levels and must therefore be reduced. But the real causes of the deficits and the debt are hardly addressed by those calling for massive cuts in Medicare-Medicaid-Social Security. So how much is U.S. deficits and debt and what are their true causes?

 

The total US federal government debt rose between 2000 and 2011 by approximately $9.2 trillion, from $5.6 trillion in 2000 to $14.8 trillion today, according to the Federal Reserves Flow of Funds reports.

 

There are basically eight causes of the $9.2 trillion rise in the US federal debt over the past decade: excess inflationary defense-war spending; the Bush tax cuts from 2001-2011; the direct Congressional funded bailouts of banks and corporations following the banking crash of 2008; Bush and Obama’s successive fiscal (tax cuts and spending) stimulus packages of 2008-11; price gouging by health insurance companies and health services providers; and simple interest on the debt for all the above. The amounts and calculations for each are summarized in Table 1 as follows:

 

TABLE 1

Eight Major Causes of $9.2 Trillion U.S. Debt Increase

 

Debt Contributing Factor Addition to Debt Percent of $9 Trillion Debt

 

1. Pentagon-War Spending $2,100 billion 22.9%

 

2. Bush Tax Cuts 2001-12 $3,150 billion 34.2%

& Extensions

 

3. Direct Bank & Other $900 billion 9.8%

 

4. Bush-Obama Stimulus $1,896 billion 20.6 %

 

5. Non-funding of Part D $450 billion 4.8%

Prescription Drugs Plan

 

6. Excess Inflation Costs for

Medicare-Medicaid $180 billion 1.9%

 

7. Lost Tax Revenue from $255 billion 2.7% 18 million additional unemployed

 

8. Interest on the $9 Trillion $270 billion 2.9%

____________ $9,201 billion ($9.2 trillion)

 

Sources: (1)Office of Management & Budget historical tables & BLS for CPI change; (2) Center for Budget and Policy Priorities, June 28, 2010, based on Congressional Budget Office and Joint Tax Committee of Congress data; (3) U.S. Treasury, TARP Report; (4) (5), Medicare Trustees Report for 2011, (6) Wall St. Journal, New York Times, Economic Policy Institute, Center for Budget and Policy Priorities articles and analyses; (7) Federal Reserve Bank, Flow of Funds Report, July 2011 and authors calculations.

 

http://jackrasmus.com/2011/11/17/the-8-real-causes-of-deficits-and-the-debt/

[Cactusboy]

Each of the 8 causes is explained in the article...also w/ this conclusion.

 

 

In summary, the true causes of the deficits and therefore the $9.2 trillion run-up in the federal debt are wars and runaway Pentagon equipment spending, the Bush tax cuts, the bailouts of banks and corporations, the fiscal stimulus packages of Bush-Obama that didn’t result in economic recovery, the chronic three year long 25 million jobless situation, and price gouging by health insurance and health services providers.

[HSKR]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

[HeyBurke]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

[strigori]

One of the biggest parts of the 'bush tax cuts' that needs to go away, and an additional increase is the Capitol Gains. 15% on them is just ridiculous. And the billionaires that collect a majority of the capitol gains don't do crap to help the economy.

[rawhide]

Who is more culpable for this spending spree? The banks/financial institutions that loaned money and credit cards to anyone able to sign their name! Or the people that knew that what they did was not sustainable. Maybe their were trying to emulate the federal government's financial strategery. Tryin' to hit both sides of the road

 

 

GBR

[HSKR]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

[HeyBurke]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

 

Calm down, dude. I wasn't referring to anyone specifically.

 

I know that not every American is responsible for the housing market collapse, but I get tired when we try and blame it all on corporations or the government. We all should bear the blame for our economy being in the toilet.

 

Once we all take responsibility, we can move on from this.

[HeyBurke]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

 

Also, I know all about making stupid decisions with loans. I took an $8000 student loan last year and I flunked out of college. It's been six months since I dropped out, and I have no payed a penny of the loan off yet. I don't blame the government for giving me that loan, though. I'm aware that I made some really bad decisions and I'm dealing with the consequences. It's one of the biggest reasons why I joined the Marine Corps.

[HSKR]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

 

Calm down, dude. I wasn't referring to anyone specifically.

 

I know that not every American is responsible for the housing market collapse, but I get tired when we try and blame it all on corporations or the government. We all should bear the blame for our economy being in the toilet.

 

Once we all take responsibility, we can move on from this.

You are right, there is a lot of personal responsibility that seems to be lost in this country, whether it's buying a house, car or racking debt on the credit card. It's also amazing when you think about what we think we need in our daily lives and how much we pay for that crap. When I was a kid, we didn't have or pay for cable tv, internet, cell phones services, etc. That right there for a normal family could easily be $300 a month that you could be putting on the house or car payment of God forbid, in a savings account. You went to the grocery store, you bought actual food you needed, not two cases of pop, chips, etc. People always want to hate on the corporations, then maybe you should quit buying Iphones, subscribing to Verizon and Instead of hating on Wall Street, don't put your money in Wall Street in the first place. It's hard to think the government will ever lessen their spending habit's when the American people many times could do the same.

[HSKR]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

 

Also, I know all about making stupid decisions with loans. I took an $8000 student loan last year and I flunked out of college. It's been six months since I dropped out, and I have no payed a penny of the loan off yet. I don't blame the government for giving me that loan, though. I'm aware that I made some really bad decisions and I'm dealing with the consequences. It's one of the biggest reasons why I joined the Marine Corps.

That's unfortunate to hear but it sounds like you have learned from your past choices and are doing the right thing now. Good luck in the Marine Corps!

[HeyBurke]

Interesting read. Can't say I disagree with most of it. The one thing that bothers me is saying that eliminating the tax cuts would help pay the debt off. That assumes the government would have used that money responsibly and not as a blank check on something else like pork or other programs. To me that is a huge assumption. I would much rather have that money in the hands of the American people to decide how to spend it. Let the government find things to cut instead. If you give the government $100, they will want to spend $150, so maybe we should only give them $50 in the first place then maybe they will only want to spend $75.

 

Are you implying that the American people spend more wisely than the government? If so, I'll have some of what you're smoking. The American people spending like idiots is a huge reason why the housing market collapsed a few years back.

 

I now know one person who thinks the government spends more wisely then your average American. Can I get a second?

 

Oh and the next time you meet someone who lost his house after his job was eliminated that he had held for 10 years, please call him an idiot to his face for me, thanks. There is no doubt that people made bad choices in the housing market, but no worse decisions then those banks did that gave them the loans in the first place or the government did by encouraging less then ideal financially sound people to buy those houses.

 

If you want to talk about idiots, then lets talk about all these college students who think it's wise to go to overpriced Universities and Colleges because the they have to pay for the overpriced faculty and administration salaries and rack up $100K in student loans in degrees where there will be little to no jobs when they get out of school. Could you ever believe that there are some kids out there who work their way through High School and get full time jobs in the summer, sometimes even two, also maybe earning some scholarships on the way, going to an institution that they can afford or heck even possibly working a couple of years before they start college and then graduating with no debt and getting a job right away because they chose a field that is actually hiring?

 

I guess if you think all those home buyers who blew it are idiots, then we should for darn sure included all those poor in debt to their ears college students who made bad choices as well, right?

 

Oh and back to the American people vs the government wasting money. I'd much rather have the American people waste their own money then someone else wasting if for them.

 

Also, I know all about making stupid decisions with loans. I took an $8000 student loan last year and I flunked out of college. It's been six months since I dropped out, and I have no payed a penny of the loan off yet. I don't blame the government for giving me that loan, though. I'm aware that I made some really bad decisions and I'm dealing with the consequences. It's one of the biggest reasons why I joined the Marine Corps.

That's unfortunate to hear but it sounds like you have learned from your past choices and are doing the right thing now. Good luck in the Marine Corps!

 

Thanks for understanding. Like I said, I wasn't attacking you or anyone else.

[rawhide]

All decisions come with consequences; please stay safe and THANK YOU for your service. Some of my best friends are Marines old but never ex

 

 

GBR

[HeyBurke]

All decisions come with consequences; please stay safe and THANK YOU for your service. Some of my best friends are Marines old but never ex

 

 

GBR

 

Thanks, rawhide!

[johnnyrodgers20]

The 8 Real Causes of Deficits and the Debt

 

November 17, 2011 by jackrasmus

 

COMMENTARY: Within a week the Supercommittee will release its recommendations for massive budget cuts targeting predominantly medicare, medicaid, social security, and raising taxes on the middle class in order to fund tax cuts for the rich and their corporations. Even if there is no joint recommendation forthcoming from the Supercommittee, the separate groups will issue their own reports and Congress will then take up the deficit cutting in any event. The attached just published essay, ‘The 8 Real Causes of Deficits and the Debt’, provides documented numbers showing how medicare-medicaid-social security and other social programs are not the cause of deficits or the debt. It is an excerpt from my forthcoming book, OBAMA’s ECONOMY: RECOVERY FOR THE FEW, to be published by Pluto Press and Palgrave-Macmillan this coming February 2012. For a further detailed consideration of alternatives to the Supercommittee’s forthcoming recommendations, see my just published 35pp. pamphlet, AN ALTERNATIVE PROGRAM FOR ECONOMIC RECOVERY, which can be ordered for $5 from my website, www.kyklosproductions.com, that is accessible from this blogsite from the sidebar to the right.

 

‘The 8 Real Causes of Deficits and the Debt’ by Jack Rasmus, copyright 2011

 

In less than two weeks the congressional Supercommittee is scheduled to release its recommendations to cut $3 to $4 trillion or more from the U.S. budget, as the U.S. blindly plunges into a Greek-like austerity program based on the erroneous economic view that budget cutting leads to economic recovery. At the heart of the cuts will be historic gutting of Medicare and Medicaid. Already Democrats have proposed a minimum of $500 billion–just about what Vice-President Biden offered to Republicans last June and President Obama last July. Not to be outdone, the Republicans countered in October with $760 billion. Supercommittee recommendations for cuts in social security retirement programs may increase that amount to more than a $ trillion.

 

One of the main arguments claiming to justify the cuts in Medicare-Medicaid is that their costs are contributing significantly to unsustainable budget deficits and federal debt levels and must therefore be reduced. But the real causes of the deficits and the debt are hardly addressed by those calling for massive cuts in Medicare-Medicaid-Social Security. So how much is U.S. deficits and debt and what are their true causes?

 

The total US federal government debt rose between 2000 and 2011 by approximately $9.2 trillion, from $5.6 trillion in 2000 to $14.8 trillion today, according to the Federal Reserves Flow of Funds reports.

 

There are basically eight causes of the $9.2 trillion rise in the US federal debt over the past decade: excess inflationary defense-war spending; the Bush tax cuts from 2001-2011; the direct Congressional funded bailouts of banks and corporations following the banking crash of 2008; Bush and Obama’s successive fiscal (tax cuts and spending) stimulus packages of 2008-11; price gouging by health insurance companies and health services providers; and simple interest on the debt for all the above. The amounts and calculations for each are summarized in Table 1 as follows:

 

TABLE 1

Eight Major Causes of $9.2 Trillion U.S. Debt Increase

 

Debt Contributing Factor Addition to Debt Percent of $9 Trillion Debt

 

1. Pentagon-War Spending $2,100 billion 22.9%

 

2. Bush Tax Cuts 2001-12 $3,150 billion 34.2%

& Extensions

 

3. Direct Bank & Other $900 billion 9.8%

 

4. Bush-Obama Stimulus $1,896 billion 20.6 %

 

5. Non-funding of Part D $450 billion 4.8%

Prescription Drugs Plan

 

6. Excess Inflation Costs for

Medicare-Medicaid $180 billion 1.9%

 

7. Lost Tax Revenue from $255 billion 2.7% 18 million additional unemployed

 

8. Interest on the $9 Trillion $270 billion 2.9%

____________ $9,201 billion ($9.2 trillion)

 

Sources: (1)Office of Management & Budget historical tables & BLS for CPI change; (2) Center for Budget and Policy Priorities, June 28, 2010, based on Congressional Budget Office and Joint Tax Committee of Congress data; (3) U.S. Treasury, TARP Report; (4) (5), Medicare Trustees Report for 2011, (6) Wall St. Journal, New York Times, Economic Policy Institute, Center for Budget and Policy Priorities articles and analyses; (7) Federal Reserve Bank, Flow of Funds Report, July 2011 and authors calculations.

 

http://jackrasmus.co...s-and-the-debt/

 

 

I find it funny that it isn't the (1) Bush-oBUMa war spending or the (2) Bush-oBUMa tax cuts seeing as from 08-12 will be under oBUMa but it is the (4) Bush-oBUMa stimulus when oBUMa spent most of the stimulus!!

 

Maybe someone doesn't like conservatives and is skewing the way people see the numbers!!